U.S. retail sales showed unexpected vigor in March as Americans shrugged off high gasoline prices and bought a range of goods, suggesting economic growth in the first quarter was probably not as weak as many had feared.
Retail sales increased 0.8%, the Commerce Department said on Monday, after rising 1.0% in February.
Last month's gains, which surpassed economists' expectations for only a 0.3% rise, could prompt analysts to raise their forecasts for first-quarter consumer spending, the main driver of the economy.
The economy grew at an annual rate of 3.0% rate in the fourth quarter and growth in the Jan-March period was seen at around 2.5%.
"It's a clear sign that U.S. consumer spending remains strong. On balance I think it's the latest sign here that the U.S. economy is outpacing a lot of its major counterparts in recovery," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
However, the growing optimism over the economy was tempered by a separate report showing that manufacturing in New York state slowed sharply this month as shipments of goods weakened.
Factories, however, hired more workers and received higher prices for their goods, giving the report a mixed tone.
The New York Federal Reserve Bank said on Monday its "Empire State" manufacturing activity index fell in April to 6.56, the lowest reading in five months, from 20.21 in March.
Another report also showed confidence among homebuilders slipped in April for the first time in seven month amid expectations of a slower sales pace in the next six months.
Stocks on Wall Street were narrowly mixed in early dealings, while prices for Treasury debt were little changed. The dollar rose modestly against a basket of currencies.
BROAD-BASED SALES GAINS
The rise in sales last month was broad-based, even though Americans paid 27 cents more per gallon of gasoline than they did the prior month.
So far, Americans appear to be taking rising gasoline prices in stride, thanks to a mild winter that has cut heating bills.
Motor vehicle sales rose 0.9% after increasing 1.3% in February. Auto sales have accelerated in recent months, boosted by pent-up demand by households.
Excluding autos, retail sales climbed 0.8% last month after advancing 0.9% in February.
Elsewhere, gasoline sales receipts increased 1.1% after rising 3.6% in February. The rise in gasoline sales reflected high prices at the pump.
Excluding autos and gasoline, sales advanced 0.7% in March, adding to the prior month's 0.5% gain.
Last month, clothing store receipts rose 0.9%, while sales at building materials and garden equipment suppliers jumped 3.0% – the largest gain since December.
Unseasonably mild weather has helped to boost sales at clothing retailers as well as purchases of building materials and garden equipment.
So-called core retail sales, which exclude autos, gasoline and building materials, rose 0.5% after increasing by the same margin in February.
Core sales correspond most closely with the consumer spending component of the government's gross domestic product report.
Sales at restaurants and bars edged up 0.3%, while receipts at sporting goods, hobby, book and music stores rose 0.5%. Sales of electronics and appliances increased 1.0%, the largest gain since October, while receipts at furniture stores climbed 1.1%.
A second report from the Commerce Department showed business inventories increased 0.6% to a record $1.58 trillion as auto dealers restocked to meet increased demand for motor vehicles from consumers.
